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Lesson 6 & 7 Exam
| Question | Answer |
|---|---|
| What happens when the price of a good adjusts to bring the quantity demanded and the quantity supplied into balance? | market equilibrium |
| At the farmers market, what happens when watermelons reach their equilibrium price? | Customers will buy all of the melons that farmers are selling. |
| Markets are governed by | the law of supply and demand. |
| What is likely to happen if a farmer sells her entire supply of watermelons in the first hour the farmers market is open? | She will raise her prices at the next farmers market. |
| What leads to excess demand? | More people want a good or service than producers can supply. |
| How do consumers experience excess demand? | as a shortage |
| The owners of a juice bar produce a smoothie that is wildly popular, and they cannot keep up with demand. What can they do to solve this problem? | all of the above |
| Suppose the owners of a bakery have more cupcakes on hand than customers want to buy. What might have caused this excess supply? | The bakery raised the price higher than people were willing to pay. |
| Which of the following is an example of a supply shifter? | an increase in the cost of inputs |
| Suppose medical research were to identify blueberries as a powerful "brain food." How would that affect the demand curve for blueberry smoothies? | It would shift to the right. |
| A drought reduces the blueberry harvest, but the demand for blueberries is unchanged. How would that affect the equilibrium price and quantity? | The price increases as the supply decreases. |
| Which statement about demand and supply is true? | The impact of shifts in demand and supply is not always immediately clear. |
| Real estate in Manhattan is very expensive. What information do real estate prices convey to consumers? | There is a shortage of real estate in Manhattan. |
| Suppose home prices in a city are increasing. What is a logical result of this price increase? | Construction firms begin building more homes. |
| In 2005, Hurricanes Katrina and Rita hit the Gulf Coast and disrupted the supply of oil. What was the impact on gas prices? | Gas prices fluctuated while the supply of oil was unpredictable. |
| Which statement is true? | Prices allocate scarce resources efficiently. |
| A price floor is | a government-set minimum price consumers are required to pay for a good or a service. |
| Rent control is an example of | a price ceiling. |
| One example of when the government might impose rationing is | when essential, but high-demand, goods are in short supply. |
| Why is it often difficult for the government to end price controls? | all of the above |
| What are the owners of this shop trying to achieve with their prices? | market equilibrium |
| Economists define market structure according to four main characteristics: number of producers, similarity of products, ease of entry, and | control over prices. |
| The most competitive market structure is | perfect competition. |
| Barriers to entry are | obstacles that can restrict access to a market and limit competition. |
| Nearly perfect markets are beneficial because producers are as efficient as possible and | consumers do not pay more for a product than it is worth. |
| The most extreme version of imperfect competition is | monopoly. |
| A monopoly can best be summed up as | one producer, a unique product |
| Which of the following is an example of a natural monopoly? | the water system that serves the greater Boston metropolitan area |
| What is a contract issued by a government entity that gives a firm a sole right to provide a good or service in a certain area? | a public franchise |
| An oligopoly is a market or an industry | that is dominated by just a few firms that produce similar or identical products. |
| An industry is considered an oligopoly | if the four top producers together supply more than 60 percent of the total output. |
| Oligopolies may sometimes act like monopolies when they use cooperative pricing. Which form of cooperative pricing is legal in the United States? | price leadership |
| Which of the following is a modern cartel? | Organization of Petroleum Exporting Countries |
| Which market structure do we encounter most often in our daily lives? | monopolistic competition |
| What does it mean when a firm engages in market differentiation? | It seeks to distinguish its good or services from those of other firms. |
| Nonprice competition typically focuses on four factors: physical characteristics, service, status and image, and | location |
| A market failure occurs when | goods and services are not allocated in the most efficient way. |
| An externality is a side effect of production or consumption that has consequences | for people other than the producer or consumer. |
| A student graduates from college and starts a profitable new business. She creates jobs for three workers. Those jobs are | a positive externality of her education. |
| Public goods include | fire and police services. |
| Public goods are | nonexcludable and nonrival in consumption. |
| Goods and services—such as parks—that are not provided by the market system are also known as | public goods |
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jayxvu